This study was designed to evaluate the efficacy of the Holmium:YAG laser for performing lateral release and medial joint capsular tightening intracapsularly and to compare the efficacy of the laser versus a scalpel blade for performing a lateral release by performing arthroscopic surgery on 29 caprine patellofemoral joints. Specimens were divided into six treatment groups and treatments consisted of lateral release alone, medial capsular tightening alone, or both treatments, and the effect of each treatment on patellar tracking was evaluated using video analysis of optical markers. Each treatment caused significantly different magnitudes of medial patellar displacement throughout a 75° range of motion: medial tightening followed by lateral release (1.5 ± 0.10 mm, mean ± standard error of the mean); lateral release followed by medial tightening (1.1 ± 0.11 mm); medial tightening alone (0.73 ± 0.10 mm); lateral release alone (0.36 ± 0.09 mm); and sham (-0.15 ± 0.05 mm). There were no significant differences between performing the lateral release using the laser (1.5 ± 0.10 mm) versus a scalpel (1.4 ± 0.11 mm). This study shows that lateral release can be performed as effectively with the laser as with a scalpel and that the laser is an effective tool for performing lateral release and medial joint capsular tightening procedures intracapsularly in this caprine model.